Where You Can Buy for the Money You Want to Spend
San Francisco Home Sales by Neighborhood
You want to buy a house in San Francisco for under a million dollars, or for over $2 million, or you have $1,800,000 to spend on a luxury condo with a spectacular view. If you’re buying a house in San Francisco, your price range effectively determines the possible neighborhoods to consider. That does not apply quite as much to condos and TICs, except for sales in the luxury segment: generally speaking, in neighborhoods with high numbers of condo and TIC sales, there are buying options at a wide range of price points, though, obviously, size and quality will vary. Also, all the new condo projects being built in many different areas of the city is changing the neighborhood pricing dynamic for condos.
For your convenience, a neighborhood map can be found at the bottom of this report.
The charts below are based upon sales reported to MLS in the 12 months between March 1, 2013 and February 28, 2014. We’ve broken out the neighborhoods with the most sales within given price points. There are exceptions to neighborhood norms scattered throughout the city and in an appreciating market these price ranges having been moving upward.
Buying a House for Under $1 million in San Francisco
Out of the approximately 2635 house sales in the past year, about 50% sold for under $1 million. The vast majority of these sales occur in a large swath of neighborhoods forming a giant L shape, down the west side of the city, from Outer Richmond to the border with Daly City, and then sweeping east across the southern side of San Francisco to Bayview and Hunter’s Point. Generally speaking, the western and central-ish neighborhoods cost more than the southern neighborhoods in this under $1m house market.
Houses in these neighborhoods began their recovery from the market downturn a step or two behind more expensive areas in San Francisco, but now the markets here are red hot and very competitive, and home prices are under very strong upward pressure.
Houses for $1 Million to $1.5 Million
In this price point, one moves into a big circle of neighborhoods in the middle of the city plus the Richmond District in the northwest. Within this circle, one will typically get significantly more house for one’s money in the Sunset, Central and Outer Richmond, Miraloma Park or Bernal Heights than in Glen Park or Potrero Hill, or especially, Noe or Eureka Valley.
Houses for $1.5 million to $2 million
As the price range goes up, the number of sales begin to narrow. The neighborhoods in this house price range are similar to the previous range, but sales predominate in central Realtor District 5, which comprises the greater Noe- Eureka-Cole Valleys area. District 5 has been a white hot market for the last two years and competition for homes here is ferocious.
Buying a Luxury Home in San Francisco
Rather arbitrarily, houses selling for $2 million and above, and condos, co-ops and TICs selling for $1.5 million and above are designated as luxury home sales in San Francisco: these homes now make up about 14% of total home sales (up from about 10-11% a few years ago). Once again, what you get in different neighborhoods for $2 million can vary widely – a large, immaculate house in one place, a fixer-upper in another.
Luxury home sales in San Francisco are dominated by the swath of established, prestige northern neighborhoods running from Sea Cliff through Pacific Heights and Russian Hill to Telegraph Hill, by the greater Noe-Eureka-Cole Valleys district, and, to a lesser extent, the smaller neighborhoods around St. Francis Wood. For luxury condos, the greater South Beach-Yerba Buena-Mission Bay area has a large and growing presence as big, expensive condo projects have sprouted there over the past 15 years.
Luxury Condo, Co-op and TIC Sales
As one can see, no area has more luxury condo, co-op and TIC sales overall than the Pacific Heights-Marina district, but the Russian Hill-Nob Hill-Financial District area has more sales of $2 million and above, and again the South Beach-Yerba Buena area is the fastest growing luxury condo market and will probably take first position in the not too distant future. The average dollar per square foot values for luxury condos in the major neighborhoods below run $918 in the Noe, Eureka and Cole Valleys district, $961 in the Pacific Heights-Marina district, $1147 in the Russian-Nob-Telegraph Hills district, and $1229 in the greater South Beach-Yerba Buena area (think newer construction, high floor units and spectacular views).
With the construction of new high-end, high-tech-amenity condo projects on Market Street and Van Ness, and in neighborhoods like the Inner Mission, Hayes Valley and Inner Richmond — often selling for more than $1000 per square foot — luxury condos are now spreading into new areas of the city.
Luxury House Sales in San Francisco
It wasn’t so long ago that houses selling in Realtor District 5, the greater Noe/Eureka/Cole Valleys area (which includes Clarendon, Corona and Ashbury Heights), for over $2 million were an exception. But that is certainly not the case any longer. If we looked closer at the sales in the $2 million to $5 million, we’d find the higher end of the range dominated by Realtor District 7, the Pacific Heights-Marina area, the most expensive house market in the city. Though District 5 does see sales in the $3.5 to $5+ million range, most of its luxury houses sell between $2 million and $3.5 million. There are several other significant areas for these high-end houses, such as Lake Street/Sea Cliff, St. Francis Wood/Forest Hill and Lower Pacific Heights.
Most luxury houses in the city were built in the period between 1905 and 1950, reflecting the era of construction dominating these neighborhoods of San Francisco — and a gracious, elegant era it was. However, there are a small number of big, new houses built each year, as well as some beautiful fifties houses scattered here and there, and, of course, many of the older houses have been extensively renovated over the years.
And, as illustrated below, at the very top of the luxury house market, the district of Pacific & Presidio Heights, Cow Hollow and Marina completely dominates sales. Here mansions can sell for up to $20 million or $30 million. Houses in Russian Hill are also exceedingly expensive, but there are very few houses in that area: Russian & Nob Hills are dominated by high-end condos and co-ops. Two additional house sales (both listed by Paragon) in the $5 million to $7 million range closed in Noe Valley in the first half of March 2014 (after the time period of this analysis) — another indication of what’s happening there, often driven by young, high-tech wealth. It should be noted that a fair percentage of these ultra high-end home sales occur privately, outside of MLS, and are not reflected in this chart.
San Francisco Neighborhood Map
March 2014 Report
Upward pressure on home prices is based on one basic dynamic: more demand than there is supply to satisfy it. Various factors can supercharge demand, such as extremely high rents and low interest rates, which make homeownership more attractive, as well as a sudden, large influx of new, affluent buyers (our high-tech boom) piling into what is basically a relatively small, inventory-constrained market. When there are 5, 10 or sometimes 20 qualified buyers chasing after every attractive, reasonably priced, new listing, prices typically go up, sometimes quite quickly.
Last year, after the spring feeding frenzy, the market generally stabilized through the end of the year: It continued to be a strong market by any measure, but prices mostly plateaued, albeit often at new peak levels. We recently speculated on tentative signs that suggested a further market normalization, but now the indicators are pointing in a different direction. The inventory of homes available to purchase on any given day is even lower than before last year’s furious market; buyer demand has emerged from its midwinter hibernation like a hungry bear; and prices are under increasing pressure once again.
The spring selling seasons of 2012 and 2013 saw huge spikes in home price appreciation. Now we enter the third spring since our market recovery began in earnest, and the desire to live in our small, beautiful, expensive city continues unabated. We shall see how it plays out in the coming months.
Median Sales Prices: Heading Up Again
There is an aspect of seasonality to median home prices – typically up in spring, down in summer, up in autumn, down during the holidays — which explains some of the fluctuations seen on this chart, though the upward trend since 2012 began is very clear. It’s common for median prices to fall in January and February: This reflects offers accepted during the holiday season, when the higher end of the market often checks out. But not in 2014: median sales prices for houses and especially condos jumped dramatically in the past two months, which may suggest another white-hot spring market. Note that median sales prices are often affected by other factors besides changes in values, such as inventory, and longer term trends are much more meaningful than short term fluctuations.
This link below illustrates the longer-term trend in median sales prices in San Francisco for houses, condos and TICs, by year since 1993:
Longer Term Trends
3-Bedroom House Values by Neighborhood
This is one of 8 updated tables on San Francisco home values by median and average sales price, and average dollar per square foot. The full analysis looks at houses, condos and TICs by neighborhood and number of bedrooms throughout the city and can be found via this link below. All general statistics typically disguise a huge variety of values in the underlying individual sales, but can give a good idea of comparative home values.
2-Bedroom Condo Values
2-bedroom condo values by median and average sales price, and average dollar per square foot, sorted by neighborhood. Again, the full report can be found here:
Sales Price over Asking Price: A Sudden Spike
Last month, we pointed to the decline in the percentage of sales price over list price for homes selling without price reductions in December and January as a possible indication of a cooling market. February completely reversed that trend (though one should never make too much of one month’s data).
Home Values around the Bay Area
This map illustrates overall median sales prices for houses in cities all over the Bay Area. In San Francisco, median prices by neighborhood can vary from under $500,000 to over $4,000,000; other cities will often display a similarly wide range of home prices in different neighborhoods.
Sales by Property Type: Condos Up, TICs Down
As shown in this first chart, condo sales now outnumber house sales, a trend that will only continue to accelerate as new condo developments are built. Very few new houses are built in San Francisco and they generally simply replace older homes.
This link illustrates the decline in sales for TICs and 2-4 unit buildings, which is occurring due to a variety of factors, including financing issues, rental units converting to TICs, TIC units converting to condos, and complex tenants’ rights and eviction issues.
TIC & 2-4 Unit Building Sales
Case-Shiller Price Trends by Price Segment since 2000
All numbers relate to a January 2000 value of 100: A reading of 182 signifies a home value 82% above that of January 2000. These 3 charts illustrate how different market segments in the 5-county SF metro area had bubbles, crashes and now recoveries of enormously different magnitudes, mostly depending on the impact of subprime lending. The lower the price range, the bigger the bubble and crash. The upper third of sales by price range (far right chart) was affected least by the subprime fiasco and has now basically recovered peak values of 2006-2007. In the city itself, where many of our home sales would constitute an ultra-high price segment, if Case-Shiller broke it out, many of our neighborhoods have risen to new peak values. The lowest price segment (far left chart), more prevalent in other counties, may not recover peak values for years. If one disregarded the different bubbles and crashes, home price appreciation for all three segments since January 2000 is almost exactly the same, in the range of 75% to 82%.
A more detailed report on the Case-Shiller Home Price Index can be found here:
Case-Shiller Index Report
February 2014 San Francisco Market Report
It is far too early in the year to reach definitive conclusions regarding substantive changes in the market, but there are indications of a number of shifts. From the hurly burly on the street, the word is that the quantity of offers coming in on new listings is declining. Where a new listing might have attracted 10 or 12 offers last spring, 3 or 4 are coming in now; where 3 or 4 offers would have arrived, the seller is getting 1. And, according to Broker Metrics, for every 2 listings that accepted offers in December and January, another listing expired or was withdrawn without selling.
The amount of competition deeply affects home price increases.
There are still a very large number of buyers looking at listings online and at open houses. But more of them appear to be first-time buyers and they are proceeding more cautiously. Some buyers are burned out on the multiple-offer bidding frenzies of last year and are reluctant to participate in them. Though the market remains hot by any reasonable standard, by some statistical measures it is cooling. This may reflect a transition or only a lull before the spring sales season begins.
Recently, the investment-property analysis firm Reis speculated that SF apartment-rent growth — which has been extraordinary by any measure, especially in a period of low inflation — will slow despite intense demand and very low vacancy rates, simply because people can’t pay any more. It’s an idea which may or may not be correct or apply to other types of housing costs. Rent rates do play a role in purchase prices as buyers often compare the net housing costs of the two options.
Median Sales Price Appreciation by Neighborhood
In San Francisco, some of the most affluent neighborhoods — such as the Pacific Heights-Marina district and the Noe, Eureka and Cole Valleys district — started their recoveries in the second half of 2011, well before virtually every place else in the city or country. When 2012 began, prices in these districts soared, while other areas played catch up. In 2013, that dynamic flipped: Appreciation rates in comparatively less expensive neighborhoods surged, while slowing in the most affluent areas.
A big part of this is simple affordability: Priced out in one neighborhood (or city), buyers focused on others, similar in ambiance but less costly. Home prices there looked so good in comparison that buyers were willing to bid them up. The huge decline of distressed sales in areas severely affected, such as in Bayview, has had an outsized effect on median sales prices there. Continuing gentrification, as in the Mission, and increasing “luxury” condo construction in less affluent areas have also played parts in this trend. It’s not as if demand plunged in the Pacific Heights-Marina district (or Noe Valley, for that matter). Quite the contrary: its 9% appreciation rate in 2013 translated into the city’s largest median price increase in dollar terms ($300,000). However, in the previous year, this district saw year over year median price appreciation of 25%.
Note that median price appreciation does not perfectly correlate to changes in home values, as it can be affected by a variety of market factors. It does give an approximate sense of market trends.
Percentage of Sales Price above Asking Price
As the market turnaround began in earnest in early 2012, two trends emerged: 1) increasing percentages of sales without any previous reductions in list price, hitting a whopping 90% of sales in May 2013, and 2) sales prices exceeding asking prices by escalating percentages, hitting an incredible average of 9% over list price in June of last year. Both of these highs reflect the ferocious spring 2013 market frenzy. Since then, these statistics dropped, stabilized and have now dropped some more. One shouldn’t make too much of a month or two of data, and it must be noted that the January numbers — 81% of sales occurred before any price reductions, at an average of about 4% over list price — would signify a red hot market at any other place or time, but they are significant drops from those predominating last year. We won’t know whether it’s a seasonal blip or the beginning of a major shift until the spring selling season gets underway.
Case-Shiller Home Price Index: 2012-2013 Appreciation
This chart is updated through November 2013, reflecting the last Index report published by Case-Shiller: It illustrates approximate Bay Area home price appreciation for higher priced homes, which San Francisco’s generally are, over the past 2 years. Spring 2012 and especially spring 2013 saw very large upswings in values, but prices then stabilized and basically plateaued since last summer began. Will this spring bring another increase in prices or has the market exhausted its appreciation momentum for now? We shall soon know. Note that chart numbers refer to January 2000 values designated as 100: 181 signifies home values 81% above that of January 2000.
This link goes to a chart looking at the past 18 years of home price appreciation, illustrating longer term cycles in real estate:
Case-Shiller Index since 1996
Inventory of Homes for Sale
One thing that has not changed in the market is the very low level of homes available to purchase. Historically, inventory usually surges in spring, declines somewhat during the summer, jumps again in autumn (September is typically the single month with the greatest number of new listings) and then plunges dramatically for the holidays and mid-winter. Agents and buyers are desperately hoping for a major surge of new inventory in the next couple months. Generally speaking, low inventory puts upward pressure on prices when buyer demand is healthy.This link looks at Months Supply of Inventory. While still very low — anything under 3 months is typically considered a Sellers’ market — it is climbing. The lower the MSI, the stronger buyer demand is as compared to the supply of homes available to buy, and the more likely prices are to rise.
Months Supply of Inventory
Updated Neighborhood Price Charts
We’ve updated long-term market value charts for several dozen San Francisco neighborhoods. This one is for Bernal Heights, a neighborhood which experienced feverish appreciation in 2013. This link below goes to the webpage containing all these neighborhood charts. Let us know if you can’t easily find one for the neighborhood or property type you’re most interested in.
SF Neighborhood Home Values
Mortgage Interest Rates
Confounding “expert” predictions once again, interest rates in the first week of February fell to their lowest point in almost 3 months, though they were still about 1 percentage point above the historic lows of one year ago. Interest rates play an enormous role in homeownership affordability, and the incredibly low rates of recent years have been a significant factor in the market recovery. They are expected to rise, but then they were expected to jump to 6% or more in 2010 and fell dramatically instead. Where they will go this year is one of the wild cards of the real estate market.
Unusual Spike in Condo Median Sales Price
January is not a high-sales quantity month as its sales mostly reflect accepted-offer activity in December, the slowest month of the year, and monthly median price data is not that reliable as it can fluctuate without great meaningfulness. However, an odd data point came up for median sales prices in January: The median price for SF houses dropped an insignificant amount, from $938,000 in the 4th quarter of 2013 to $928,000 in January (down from a brief spike to $976,000 in the 2nd quarter). However, the median sales price for SF condos made a very big leap from $835,000 in the 4th quarter to $927,500 in January, the highest monthly condo median price ever. Of the 144 January condo sales reported to MLS as of 2/8/14, 45 sold for $1,200,000 or more. This is an unusually high percentage of high-end condo sales, especially for a January — January 2013 had 19 such transactions — and is probably just one of the anomalies we sometimes see in monthly sales data. (We much prefer longer-term data.) We’ll have to watch what happens in future months.
One can never take for granted exactly what is going to happen next in the San Francisco real estate market.
The real estate market recovery started in earnest in 2012 and then went white hot in spring 2013, which resulted in a huge jump in home prices. In the last six months of the year, the market calmed somewhat and prices generally stabilized, but buyer demand remained very strong by historical standards. Economic conditions have continued to improve, household net worth has increased dramatically with rising stock and housing markets, rents remain very high, new construction is soaring and interest rates, after jumping in 2013, are still relatively low. Though it is impossible to predict the future, these factors typically form the foundation of a healthy, active housing market.
In the next few weeks, new listings will start coming on market, buyers will get back in home-search mode and the market will begin to wake up after the holiday hibernation. Then we’ll start to get an inkling of what the new year has in store.
If you missed our survey of what San Francisco homebuyers bought in 2013, you can find it here: 2013 Market Survey. It was reported on by SFGate, KGO Radio and other major media.
This first chart above gives a longer-term overview of city, state and national real estate price trends. Though varying by neighborhood, San Francisco has generally made a complete recovery from the market decline suffered in 2007-2011. Some city neighborhoods surged to new peak values in 2013.
This chart below tracks San Francisco median prices by quarter, illustrating how the rebound in values progressed in steps since the recovery began.
And below, home value changes for Bay Area higher priced homes are charted over the past 2 years according to the S&P Case-Shiller Home Price Index.
Total Home Sales by Year (below).
The quantity of sales in the past two years has been severely constrained by an inadequacy of inventory to meet demand. This, of course, is also a major factor behind price increases.
San Francisco Luxury Home Market
A major component of the recent recovery has been the terrific resurgence in luxury home sales. There are 3 main factors involved: firstly, the affluent have benefited most from the big surge in financial markets, which makes them feel even more affluent; secondly, our local high-tech boom has minted a large number of newly wealthy homebuyers; and finally, the simple increase in prices moves a certain number of home sales into the price categories we typically define as luxury ($1.5m and over for condos, co-ops and TICs; $2m and above for houses).
Home Price Appreciation by Selected Neighborhoods
This chart measures increases in median home prices over the past two years for a number of SF neighborhoods. Median price changes are not exact correlations of value changes, but give an approximate range of appreciation, in this case, about 25% to 30%. Distressed home sales were not included in this analysis as they typically do NOT reflect fair market value; if they had been included, several of these neighborhoods would show much greater percentage price increases since 2011.
And this chart below looks at median sales price appreciation in a few higher priced home segments. Here, we also added the change in dollar per square foot values (though not reflected in the chart columns). Note that appreciation rates between median prices and dollar per square foot can vary in the same neighborhood, which emphasizes that these are general statistics best used for indicating trends and delineating the range of value changes.
2013: Peak & Plateau
This chart is a bit complicated, but illustrates the differences in the heat of the market between 2011 and 2013, and, specifically, the peak of the market frenzy in the second quarter of 2013. In the second quarter, almost every statistical measure reflected the hottest market in recent memory: fewest price reductions and expired listings, lowest days on market, highest percentage of sales over list price, lowest interest rates in history, and so on. In the two quarters after, the market slowed and plateaued, but remained quite strong – as one can see by comparing them with 2011.
Selected 2013 Neighborhood & District Snapshots
South Beach-SoMa-Yerba Buena-Mission Bay
Above is a look at the biggest condo market segment in the city, where the vast majority of new condo construction has occurred and is continuing to occur. Condos of every price range are found here, including a very substantial ultra-luxury component with extremely high dollar per square foot values (and typically with utterly spectacular views).
Potrero Hill, Bernal Heights and Inner Mission markets
Noe-Eureka-Cole Valleys District Snapshot
An overview of house, condo and TIC sales in this very hot central district of the city.
Pacific & Presidio Heights, Cow Hollow and Marina
The highest house prices in the Bay Area.
Russian, Nob & Telegraph Hills
Some of the most expensive condos in San Francisco are located in this district.
Mortgage Interest Rates
2014 started with a 30-year conforming interest rate of 4.5%, which is about a full percentage point above the historic lows one year ago. This affects the cost of homeownership significantly (if one is getting a loan), but the rate is still quite low in the context of the past 30 years.
Government Shutdown & Default Fears Affect SF Homes Market
Paragon Real Estate Report, November 2013
The number of home listings accepting offers was way down in October (when it usually goes up); months-supply-of-inventory was significantly up (when it usually goes down in October); average days on market were still very low; median sales price was generally stable: The San Francisco real estate market is currently delivering a wide variety of signals, some of them undoubtedly influenced by the U.S. government shutdown fiasco, which dominated the first 3 weeks of last month.
Percentage of Listings Accepting Offers
October is usually one of the busiest months of the year for buyers purchasing new homes – as measured by having their offers accepted – as they react to the surge of new listings that typically arrives after Labor Day. But the government shutdown and the threat of U.S. default hammered October’s activity as SF buyers nervously waited to see how it was going to shake out. Surveys show that the affluent were the group most concerned about a possible default – and SF is a very affluent home-buying market. In this chart, the plunge in the percentage of listings accepting offers is well illustrated; and on a unit basis, the number of homes accepting offers dropped by about 20% year over year, a big decline. Closed sales were actually up about 7%, but October closings reflect accepted offer activity in August/ September before the shutdown crisis began. It is too early to tell if there is more going on in the market besides the temporary reaction to default fears.
This chart on Months Supply of Inventory shows a similarly unusual trend for October: MSI going up from September instead of down. Though it’s well up from recent months, it’s still low by market standards.
Months Supply of Inventory
Average Days on Market
Although many fewer listings went into contract (i.e. accepted offers) in October compared to last year, those homes that did accept offers did so, on average, very quickly. That, of course, is usually an indication of a hot market. So buyers didn’t snap up as many listings – either as a percentage of listings or in units – but the ones they did, were snapped up very quickly. Sometimes different statistics appear to indicate different trends on a short-term basis; such anomalies are almost always resolved over a longer term.
Case-Shiller Home Price Index
The last Case-Shiller Index reading – for the 5-county “SF Metro Area” – came out in late October for the month of August, and it’s a 3-month moving average, so the Index really reflects the market 3 to 5 months ago. This chart gives an overview of long-term trends in Bay Area values for homes in the upper third of sales by price range (i.e. more expensive homes). If we looked at what was happening month by month in the Index, we’d see a gradual plateauing of price appreciation of higher-priced homes over the past few months after the furious increases of spring. Home values in the city of San Francisco itself (as opposed to the Metro Area) are now generally above the previous peak values in 2006-2008.
Paragon Case-Shiller Report
Median Sales Price Appreciation
This chart tracks SF home median price appreciation since the market recovery began in earnest. The overall trend has been dramatically up, but median prices for the last 5 months have been relatively flat after the springtime spike. If the October slowdown in accepted offers had any effect on median prices, it won’t show up until November and December closed sales are tallied. The market has certainly shifted from the frenzy of the first half of the year, but, except for October (affected by default fears), statistical measures of supply and demand have generally continued to show a strong market by historical measures. If a significant shift is occurring in the market, it will become clearer in the statistics of upcoming months. Note that median price changes are not perfectly correlated to changes in home value, as they can be affected by issues such as seasonality and inventory.
Mortgage Interest Rates
In good news for buyers and sellers, 30-year interest rates have been dropping and are now at their lowest since June (though still above the historic low reached earlier in the year).
Home Values around the Bay Area
We just updated our Bay Area Home Value map, which provides an interesting look at comparative home prices around the bay. Remember that each median price delineated for a particular city disguises a huge variety of prices in the underlying sales. For example, in San Francisco, median house sales prices by neighborhood vary from under $500,000 to over $4,000,000. Other towns and cities will have a similarly wide range in property values underlying their overall median sales prices.
San Francisco Neighborhood Values
San Francisco Median Home Sales Prices
It’s not unusual for median prices to fall in the first and third quarters (affected by winter and summer holidays) and rise in the second and fourth quarters (prime spring and autumn selling seasons). This is what happened in this past third quarter and it typically has more to do with seasonal factors than changes in market values. One has to look at the longer term trend, not monthly or quarterly fluctuations, to determine what’s really happening in the market. For the last 6 quarters, the overall trend in home prices has been upward.
3rd Quarter Home Sales Snapshot
These statistics for the third quarter indicate a market that is still extraordinarily strong by any historical measure: 87% of home sales sold quickly without price reductions, at an average of almost 8% over asking price. It did cool down somewhat from our insanely frenzied spring season, but part of that is explained by the typical summer slowdown dynamic. How the market performs in the next two months will tell us a lot about whether the market is settling down, transitioning to a new phase or continuing to race along in high gear.
San Francisco Neighborhood Home Values
We’ve updated our home-value maps to reflect sales for the past 5 months: The city is reaching some very high points in median sales prices and average dollar per square foot values. This map is for San Francisco house values and this link goes to our new interactive map for both house and condo values:
Home Price Appreciation vs. Inflation since 1988
Inflation over the past 25 years has been relatively slow and steady, while home prices have gone up and down dramatically according to the market cycle. But since 1988, home value appreciation in the Bay Area has generally exceeded CPI inflation by a significant amount, which is good news for homeowners. If you’d like to read our complete report on home prices, inflation, leverage and home equity, you can find it here:
SF Luxury Home Sales
One of the classic seasonal trends in real estate is the decline in the number of luxury home sales in the first and third quarters, because the higher end of the market has a greater tendency to check out for the holiday seasons. This is a major factor behind the typical decline in median sales prices during these periods, as referred to above. Though luxury property sales were far above recent years, this decline in unit sales occurred in this past quarter as well. If market conditions and seasonal trends hold true, we should see a big uptick in luxury home sales in the new quarter just begun.
Comparing Bay Area County Markets
In September, we completed a report comparing the different real estate markets in the counties around the San Francisco Bay Area. If you would like to read it in its entirety, you can find it here:
Inventory of Homes for Sale
September did see a spike in the number of home listings for sale in San Francisco, but not as big an increase as we had hoped for. read more →
30 Years of Housing Market Cycles in San Francisco
Updated Report, September 21, 2013
Below is a look at the past 30 years of San Francisco Bay Area real estate boom and bust cycles. Financial-market cycles have been around for hundreds of years, all the way back to the Dutch tulip mania of the 1600′s. While future cycles will vary in their details, the causes, effects and trend lines are often quite similar. Looking at cycles gives us more context to how the market works over time and where it may be going — much more than dwelling in the immediacy of the present with excitable pronouncements of “The market’s crashing and won’t recover in our lifetimes!” or “The market’s crazy hot and the only place it can go is up!”
1982 – 2013: A Simplified Overview
Up, Down, Flat, Up, Down, Flat…(Repeat)
Smoothing out the bumps delivers this overview for the past 30 years. Whatever the phase of the cycle, up or down, while it’s going on people think it will last forever: Every time the market crashes, the consensus becomes that real estate won’t recover for decades. But the economy mends, the population grows, people start families, inflation builds up over the years, and repressed demand of those who want to own their own homes builds up. In the early eighties, mid-nineties and in 2012, after about 4 years of a recessionary housing market, this repressed demand jumps back in (or “explodes” might be a good description) and prices start to rise again. It’s not unusual for a big surge in values to occur in the first couple years after a recovery begins.
Surprisingly consistent: Over the past 30+ years, the period between a recovery beginning and a bubble popping has run approximately 6 years. We are currently something less than 2 years into the current recovery. Periods of market recession/doldrums following the popping of a bubble have typically lasted about 4 to 5 years. Generally speaking, within about 2 years of a new recovery commencing, previous peak values (i.e. those at the height of the previous bubble) are re-attained — among other reasons, there is the recapture of inflation during the doldrums years. In this current recovery, those homes hit hardest by the subprime loan crisis — typically housing at the lowest end of the price scale in the less affluent neighborhoods, which experienced by far the biggest bubble and biggest crash — may take significantly longer to re-attain peak values, but higher priced homes are already doing so.
This does not mean that these recently recurring time periods necessarily reflect some natural law in housing market cycles, or that they can be relied upon to predict the future.
Mortgage Interest Rates since 1981
It’s much harder to decipher any cycles in 30-year mortgage rates over the same period. Despite the rate spike over the summer, rates remain very low by any historical measure, and this, of course, plays a huge role in the ongoing cost of homeownership.
In the 2 charts below tracking the S&P Case-Shiller Home Price Index for the 5-County San Francisco Metro Area, the data points refer to home values as a percentage of those in January 2000. January 2000 equals 100 on the trend line: 66 means prices were 66% of those in January 2000; 175 signifies prices 75% higher.
1983 through 1995
(After Recession) Boom, Decline, Doldrums
In the above chart, the country is just coming out of the late seventies, early eighties recession – huge inflation, stagnant economy (“stagflation”) and incredibly high interest rates (hitting 18%). As the economy recovered, the housing market started to appreciate and this surge in values began to accelerate deeper into the decade. Over 6 years, the market appreciated almost 100%. Finally, the eighties version of irrational exuberance — junk bonds, stock market swindles, the Savings & Loan implosion, as well as the late 1989 earthquake here in the Bay Area — ended the party.
Recession arrived, home prices sank, sales activity plunged and the market stayed basically flat for 4 to 5 years. Still, even after the decline, home values were 70% higher than when the boom began in 1984.
1996 to Present
(After Recession) Boom, Bubble, Crash, Doldrums, Recovery
This next cycle looks similar but elongated. In 1996, after years of recession, the market suddenly took off and became frenzied — actually quite similar to what we’re experiencing today. The dotcom bubble pop and September 2001 attacks created a market hiccup, but then the subprime and refinance insanity, degraded loan underwriting standards, mortgage securitization, and claims that real estate never declines, super-charged a housing bubble. Overall, from 1996 to 2006/2008, the market went through an astounding period of appreciation. (Different areas hit peak values at times from 2006 to early 2008.) The air started to go out of some markets in 2007, but in September 2008 came the market crash.
Across the country, home values fell 15% to 60%, peak to bottom, depending on the area and how badly it was affected by foreclosures — most of San Francisco got off comparatively lightly with declines in the 15% to 25% range. The least affluent areas got hammered hardest by distressed sales and price declines; the most affluent were typically least affected. Then the market stayed flat for about 4 years, albeit with a few short-term fluctuations. Supply and demand dynamics began to change in mid-2011, leading to the market recovery of 2012.
San Francisco from 2010 to 2013
A Strong Recovery
In 2011, San Francisco began to show signs of perking up. An improving economy and growing buyer demand coupled with a low inventory of listings began to put upward pressure on prices. In 2012, as in 1996, the market abruptly grew frenzied with competitive bidding. The city’s affluent neighborhoods led the recovery, and those considered particularly desirable by newly wealthy, high-tech workers showed the largest gains. However, virtually the entire city soon followed to experience similar rapid price appreciation.
San Francisco median home sales prices increased dramatically in 2012 and then accelerated further in the first half of 2013. (Note that third quarter figures will probably show a typical seasonal decline from second quarter median prices. There are also seasonal cycles in real estate.) By all appearances, San Francisco and the Bay Area are in the midst of a healthy recovery. Among other positive signs, new home construction is soaring.
All data from sources deemed reliable, but may contain errors and is subject to revision. Copyright 2013 Paragon Real Estate Group.
Is the market flattening out after its huge appreciation surge since 2012 began, or will the autumn sales season bring another step of renewed price increases?
Right now, there are some mixed signals regarding what is occurring in the San Francisco market: spring’s big jump in values vs. the recent plateau in median sales prices; interest rates that have increased significantly, but are still extremely low by historical measures; growing signs of buyer burnout with frenzied market conditions vs. supply and demand statistics that still indicate a very strong sellers’ market; and an increasing number of expired listings, which suggests that sellers may now be pushing their asking prices too high for buyers to swallow.
Seasonality plays a significant role in median sales prices rising in spring and autumn, and declining in summer and winter – as discussed below, much of this pertains to ebbs and flows in the luxury home market and does not necessarily reflect changes in home values. With real estate statistics, the longer-term trend is what is meaningful, not short-term fluctuations up and down. Looking at the chart above, the median sales price jogs up and down for a variety of reasons, including seasonality, but stepping back, one sees the strong, ongoing appreciation since the market recovery began.
September is typically the month with the highest number of new listings hitting the market: how buyers respond will determine what the next stage of the market will look like.
The Luxury Home Market, Seasonality & Median Sales Prices
The big surge in accepted offers for higher-price homes occurs in April/May and September/ October, when these sales make up about 14% of total home sales. The big slump in luxury home sales occurs in the summer months and in December/January, when their percentage of total sales declines to about 10%: more so that the general market, the luxury segment checks out during the summer and winter holidays. This significant decline in the ratio of high-price sales to total sales is one factor that reduces overall median home sales prices during the summer and winter holiday months.
Inventory of Homes for Sale
This chart tracks the overall decline in inventory available on any given day since the market recovery began. However, despite the huge decline in listings for sale on any day, the number of MLS home sales in 2013 YTD is actually a tad higher than the same period of 2012, and 16% higher than in 2011. Because a much higher percentage of listings are selling, and selling much more quickly than before. If sellers start re-entering the market in larger numbers, the quantity of sales should jump sharply higher as well – and may stabilize home price appreciation.
New Listings Coming on Market
September is typically the single month of the year when the largest number of new listings comes on market. This chart illustrates the ebb and flow of new inventory by season. We shall see if this September brings the big surge in new home listings that buyers are hoping for.
This link’s chart tracks Months Supply of Inventory: It continues to indicate a market defined by very high demand when compared to the supply of inventory available to buy:
Months Supply of Inventory
Expired and Withdrawn Listings
The main reason for expired and withdrawn listings is that buyers ignored them as overpriced. The fact that the number of these listings has been climbing dramatically of late means that sellers are either pushing the envelope on prices or buyers are pushing back at the price points recently achieved during the height of the market frenzy – or both.
This chart indicates some of the mixed signals we’re seeing: on one hand, 87% of sales sold quickly without price reductions at an average sales price 8% over list price (i.e. an extremely hot market). On the other hand, the number of listings expiring or being withdrawn is climbing and so is the number of listings that has been on the market for 2 months or longer without accepting offers. Note the large difference between average days on market between homes that sell without price reductions (31 days) and homes that must be reduced before they sell (88 days): pricing, preparing and marketing properly is vital in any market.
Mortgage Interest Rates
Rates have been more or less stable since their big percentage jump in June. The increase in loan rates from their low point in 2013 is large as a percentage increase, but still leaves current rates very low from a historical perspective. The consensus of pundits seems to be that rates will be going significantly higher when and as the Fed begins tapering their huge bond-purchase program, but predicting interest rate changes is a tough game.
1920 to Present
A companion to our recent overview on San Francisco Victorian and Edwardian architecture (Early SF Architecture): the text, chart and photos used herein are all courtesy and permission of the San Francisco architect James Dixon: James Dixon Website. We are most grateful for his generosity in allowing us to use them.
Art Deco: 1920 – 1940
Art Deco takes its name from the International Exposition of Modern Decorative and Industrial Arts held in Paris in 1925. This new style rejected aristocracy for democracy, frugality for luxury, and European architectural references for futuristic geometric ornament. It is a decorative style of applied ornamentation, and its features include geometric ornament of zigzags, chevrons, sunbursts, and florals; and use of exotic architectural references, such as of Mayan temples and ancient Egypt.
International Style: 1925 – Present
Mies van der Rohe’s maxim “Less is more” appropriately expresses this lean and functional style. Mies was one of three gifted architects who learned functional design from the industrial architect Peter Behrens; the other two were Le Corbusier and Walter Gropius. In 1923 Corbusier published “Towards an Architecture”. It set modern engineering and unadorned honesty, pure function and pure form, as the only true standards of architecture. Corbusier’s most famous dictum, “A house is a machine for living” still influences architects today. Characteristics include no ornamentation, windows flush with walls, no trim on doors or windows, functionally efficient open floor plan and flat roof.
Streamline Moderne: 1930 – 1950
Art Deco was a transport to another time-an exuberant fantasy future or an exotic past-while Streamline Moderne was a transport to another place. It was a romance of efficient travel by ocean liner, airplane, train and car. This new science of aerodynamics rounded edges, assisted air flow around corners with horizontal grooves, and smoothed surfaces so they were unencumbered and sleek. Buildings became romantic ships and airplanes to and from another place. Characteristics include curved corners; the use of glass block; corner and porthole windows; and other elements of nautical or aerodynamic flair.
Bay Area Modernism, Second Style: 1930 – 1960
Bay Area Modernism influenced more homes throughout America than all other architectural styles combined, as seen in the vast tracts of post-World War II suburban ranch houses. Architect William Wurster combined a love of California landscapes and its rural buildings (wood-sheathed farmhouses, barns and sheds) with the elemental quality of minimalist Japanese architecture. The goal was inexpensive homes that allowed the outside in and were easily built of local, natural materials.
Bay Area Modernism, Third Style: 1950 – 1980
As the Second Bay Area Style matured, architects tired of its plainness and flirted with playful pop culture and Postmodernism. They started the Third Bay Area Style and influenced acres of tract homes throughout the United States.
Eichler Homes: 1950 – 1970
Joseph Eichler was a visionary developer who built over 11,000 homes in California. All his homes would display Frank Lloyd Wright’s core ideas: “breaking the box”, “bringing the outside in”, floor to ceiling glass, simple natural materials kept exposed, and the open floor plan. These ideas made Eichler homes airy and modern.
Post-Modernism, 1960 – 2000
To Mies van der Rohe’s modernist maxim “less is more” architect Robert Venturi famously riposted “Less is a bore.” Venturi’s 1966 book “Complexity and Contradiction in Architecture” rejected International Style modernism and, at its best, freed architects to borrow freely across architectural styles. At its worst it allowed fake historical ornament pasted to boring boxes and intentionally jarring juxtapositions of different architectural styles.
New Modernism, 1980 – Present
These buildings use modern materials, technology and computer modeling, yet strive to be humane – a radical concept in modern architecture that up to this point had revered machines, not humanity, and had rejected nature, not embraced it. Humane Modernism’s aesthetic is contemporary, but it is warm, tactile, colorful and durable. It uses the best traditional building methods to increase the everyday quality of life of the inhabitant-such as local sustainable materials beautifully detailed and exposed to view, as well as the common incorporation of “green building” features.
SF Modern Architecture Timeline
Here is a nifty timeline of San Francisco’s variety of modern architectural styles.
This link goes to architect James Dixon’s complete overview, which was the basis for this article. It features short videos on each of the architectural styles mentioned above. Also included is a link to his overview of Victorian and Edwardian styles of San Francisco architecture:
And for those who find San Francisco history as interesting as we do, here are two other websites we’ve discovered filled with fascinating stories and photographs:
Percentage Changes since 2006-2008 Peak of Market
Range from 25% Below to 25% Above Previous Peak Values
August 2013 Market Report
This heat map compares 2013 2nd quarter or 1st half median home sales prices – for houses, condos, co-ops and TICs combined – with those at the peak value time prior to the recent market recovery. Previous peak value times vary by neighborhood: typically, the least affluent neighborhoods hit peak prices in 2006 and also fell the most, percentage-wise, during the crash, falling 25% to 50%. These neighborhoods were most affected by the subprime and distressed-property sales crises. The mid-affluent neighborhoods peaked in 2007, and usually declined in value in the 20% to 25% range. And the most affluent areas reached peak values last, in the first half of 2008 prior to the September 2008 crash: Their fall in value ranged approximately 15% to 20% from 2008 peak to 2010-2011 nadir.
Generally speaking, when the market began to turn around in late 2011/early 2012, the last neighborhoods to fall were the first to recover, followed by the mid-affluent and then the less affluent areas. This link goes to our full report and an explanation of the analysis:
Heat Map Report
All-Cash Home Sales
All-cash buyers come in three main categories: the first group consists of investors buying foreclosed-upon properties, often during trust-deed auctions on the “courthouse steps.” The Blackrock Group alone has purchased over 20,000 distressed homes across the country, which they usually fix up and rent out. Other investors buy, fix up and re-sell, or just buy, wait and flip (as the market recovers). The second category of all-cash buyers consists of people who always purchase their homes without financing: These often very affluent buyers have always been around to one extent or another. And the last category of all-cash buyers are those who prefer to finance their home purchases but have enough cash available to buy without financing: In the hope of winning in a competitive bidding situation, they make all-cash offers in order to appeal to sellers. This link goes to our full report:
Homes With and Without Parking
The vast majority of San Francisco home sales include at least one on-site parking space in the sale, and 80% – 90% of buyers put parking on their must-have list when searching for a new home. That doesn’t mean that a home without parking cannot sell at a good price, but it does mean that on average it will take somewhat longer to sell, as well as selling at a lesser price than a comparable home with parking. It’s difficult to calculate the exact value differential between homes with and without on-site parking for a number of reasons. This link goes to our full report:
The Value of Parking
Renting vs. Buying in San Francisco
We’ve updated two analyses regarding the financials of renting vs. buying in San Francisco. This is the first part of our calculations regarding 2-bedroom units, comparing the median condo sales price with the average apartment asking rent. (We also did one for 3-bedroom houses.) These calculations depend to a large degree on one’s financial assumptions and projections. For our complete analysis:
Rent vs. Buy – 2-Bedroom
Largest SF Home Sales YTD
Looking at SF home sales reported to MLS by July 31, this chart shows the largest sales by neighborhood for properties selling for $3,500,000 or more. This link goes to our chart on sales below $3.5m:
Largest Home Sales, Chart 2
Victorian & Edwardian Architecture in San Francisco
In case you missed our recent article using information and photos by SF architect James Dixon, here is a fascinating timeline and this link goes to the complete, well-illustrated article on the different Victorian and Edwardian architectural home styles prevalent in the city:
San Francisco Transportation Report
We recently stumbled across the annual report of the city’s Municipal Transportation Agency (MTA) and charted some of its most interesting facts. This chart illustrates the (staggering) number of citations issued by violation, and this link goes to all 5 of our charts:
SF MTA Report